Analysis: Florida's deep-dredge projects face new hurdles

Monday, April 29, 2013

Two South Florida ports, Miami and Port Everglades, are prime examples of the dysfunctional approach in the United States for improving the waterborne transportation system.
Projects undergo a series of congressional approvals and feasibility studies that easily can take longer than a decade to complete before dredging even starts.
Cargo interests worry the Army Corps of Engineers' slow bureaucracy and the paucity of congressional appropriations for increasing the depth and width of entrances to key commercial ports is increasing the cost of shipping goods, especially as ocean carriers continue to introduce into service massive new containerships capable of holding 8,500 to 15,000 TEUs. Carriers are expected to streamline the number of ports they call and officials at East and Gulf coast ports fear they could be bypassed if they lack supporting infrastructure so vessels can sail fully loaded.
The Port of Miami recently received news that it doesn’t have enough spending authority to cover the full cost of deepening the harbor channel from 42 to 50 feet, part of a $2 billion capital investment campaign aimed at attracting behemoth container vessels and their cargo when a new, wider set of Panama Canal locks opens in 2015.
Congress authorized $181.5 million for the Miami dredge project in 2007, but never followed up with any appropriations for construction.
In 2011, Gov. Rick Scott of Florida directed $77 million be re-allocated to pick up the tab for the federal share of the $152 million project, with the port and Miami-Dade County footing the bill for the remaining $75 million. The state funding means the port does not have to wait for federal funds to be approved for the project. Port authority officials last year resolved a legal challenge by environmentalists and nearby residents opposed to the dredge project that cost a few more months of progress.
Over the years, construction costs have escalated beyond the authorized amount, potentially putting part of the project on hold until further congressional authorization, Miami Port Director Bill Johnson told American Shipper when reached by phone.
The Corps is reviewing bids for the underwater excavation and expects to award a base contract early next month, with construction tentatively set to begin in June and be completed by late spring or early summer 2015 to coincide with the debut of the expanded Panama Canal.
Johnson is not privy to the bids, but said they must have overrun the maximum total project cost approved by Congress because the Corps needs a technical fix for the tail end of the job.
When the detailed assessment of the project – known as a Chief of Engineers report – was completed in 2004, it didn’t account for three years of inflation until authorization, Johnson said. The authorization should have been for $220 million, he added.
The White House quickly got behind an authorization correction, but Johnson said lawmakers viewed the additional spending authority as a new project and didn’t include it in the recent stopgap appropriations bill funding government operations for the remainder of the fiscal year. President Obama’s 2014 budget proposal seeks to raise the spending cap on Miami’s deep dredge.
The Corps is expected to award a contract for the second phase by January, but if Congress doesn’t agree with Obama and authorize the final phase of construction the port is prepared to assume responsibility, including managing permits, bids and contracts, Johnson said.
The unusual decision to pay the remaining $25 million to $35 million and assume construction risk underscores how important county officials view the port’s potential to become a logistics hub for the Southeast. A delay in completing the harbor-deepening project would prevent the Port of Miami from being ready to receive the super-size containerships when the new Panama Canal locks open for business, and make it more difficult to compete with other ports for discretionary cargo. Port officials estimate dredging will enable Miami to double cargo volume by 2020. In 2012, the port had container throughput of 909,127 TEUs.
“I will have authorization and I’ll do the work. If I undertake Option B, that’s on my nickel,” Johnson said.
Improvements in addition to deepening include the purchase of four super-reach container cranes, bolstered wharves and bulkheads, a tunnel under construction to connect the port directly to Interstate 95 and bypass downtown, and on-dock rail access.
Meanwhile, Port Everglades 30 miles up the coast in Fort Lauderdale also recently received an unwelcome surprise from the Corps.
Seventeen years and $11 million after Congress authorized a study to determine the benefits of dredging the port’s channel from 42 to 50 feet, the public works agency discovered late last year that parts of the Chief of Engineers report contained errors because it used the wrong economic model, Florida port officials and lawmakers said.
The Corps failed to apply its new methodology for analyzing the economic impact of a project to Port Everglades, Executive Director Steven Cernak confirmed.
The mistake has lengthened the timeline for completing the study and potentially jeopardized Port Everglades’ ability to get authorized when Congress votes on a new Water Resources Development Act, expected sometime this year. If the port doesn’t get included it would have to wait until the next bill is enacted, which could be six or seven years given the pattern of the last two cycles.
Cernak said he and his staff are working closely with the Corps and Florida’s congressional delegation to get the project back on track. “We remain cautiously optimistic we’ll be able to resolve this,” said Cernak, who took the helm at Port Everglades a year ago after serving as executive director of the Port of Galveston, Texas.
“The hope is that by increasing the awareness and cooperation between the parties that the focus to complete the project is maintained by the Corps,” he said.
Everglades already has post-Panamax vessels on the North-South trade lane calling the port, but they cannot be fully loaded in order to ensure sufficient draft.
Getting full authorization is critical, Cernak said, because then Broward County “can make a business determination whether to advance the project ourselves,” much as Miami has done in the absence of federal aid.
Everglades also has the right to do a feasibility study itself, but then it would have to start all over and possibly wait five years until completion, he added.
Kurt Nagle, president of the American Association of Port Authorities, told House lawmakers during a recent roundtable discussion about infrastructure challenges facing ports, that one solution is to make an authorization for Everglades contingent on a Chief’s report being completed by the end of the year.
In January, Florida East Coast Railway broke ground on an intermodal container transfer center within the port and Gov. Scott committed $13 million to begin work on expanding a turning notch in the Southport area which will enable the port to add more berths.
(Read "Dredging up Dollars" in the May issue of American Shipper for in-depth coverage of how a new Water Resources Development Act is shaping up in Congress and what it means for ports and waterways.) - Eric Kulisch